News

Howard's Way.... a weekly column from the Rt. Hon. Michael Howard QC. MP. 

17 April 2008

It is almost always a bad sign when financial news makes the front pages of our newspapers and the top of the news on television and radio. Certainly none of is can take any comfort from the huge amount of attention currently being paid to the state of the financial markets.

What started as a crisis in sub-prime mortgages in the United States has now come to affect us all. Not surprisingly a new acronym has been invented to describe the sub-prime phenomenon. It has been characterised as NINJA lending – lending to people with no incomes, no jobs and no assets.

Most people expect things to get worse before things get better. Unfortunately there has been a good deal of irresponsible lending in this country too and we continue to have the unenviable distinction of being the only country to experience a run on a high street bank.

All too many people have bought homes at inflated prices on low fixed-rate mortgages. When these fixed rate loans come to an end they are faced with much higher repayments on variable rate loans. Sometimes the burden becomes insupportable and the property is repossessed. I read last week of a flat in Ipswich which was sold at auction for only half the price at which it had been bought two years earlier.

If you are unfortunate enough to find yourself in difficulty over your mortgage repayments there are steps you can take to mitigate the problem. The Citizens Advice Bureau can help you plan your finances more efficiently. It will often make sense to see if your payments can be rescheduled.

Our Government is unable to help as much as it should because of the very large amounts of money it is having to borrow. This means that because it failed to set aside money in the good years, its scope for cutting taxes, which would ease the burden on millions of households, is severely constrained.

I hope that these difficulties will be temporary and short-lived and that as few of you as possible will be affected in this way. No-one likes being a prophet of doom. But the current crunch has been a reminder that we often find ourselves at the mercy of events and that those who boast that they have put an end to ‘boom and bust’ do so at their peril.